SGEI APPROVAL SCHEME
Previously, the European Commission State Aid de minimis rule has meant that the amount of public funding which any individual Credit Union can receive has been limited to €100,000 over a rolling 3 year period (approximately £67,000.)
In 2002, the Scottish Executive entered into negotiations with the European Commission to find a solution to increase this level of funding, and in April 2005 secured a decision from the Commission which means that Scottish public funders may choose to fund Credit Unions above the de minimis limits if certain conditions are met.
The Commission's decision has enabled the Executive to develop an approval scheme whereby Credit Unions can be approved to carry out financial inclusion activities as a Service of General Economic Interest (SGEI) and to provide one or more of the following 4 SGEI products:-
- Credit Union savings account
- Flexible credit, which may include a loan guarantee fund
- Credit Union budgeting account, under which a Credit Union will pay bills on behalf of a saver
- Insurance products
An approved Credit Union may then receive public funding from the following public funders to compensate it for the costs of providing those products. Public funders for the purposes of this Scheme are defined as Scottish Ministers (Scottish Executive & Communities Scotland), Scottish Local Authorities, Scottish Enterprise and Highlands and Islands Enterprise. It is important to note that public funding for Credit Unions outwith the scope of the SGEI scheme will still be subject to the de minimis limits. If Credit Unions receive any public funding outwith the scope of the SGEI scheme, the de minimis rule will apply and therefore the level of such funding must not exceed €100,000 over a rolling 3 year period.
The Executive will receive applications from Scottish Credit Unions for approval and will act as the approving body. There will not be separate approval processes run by other public funders. This will ensure that approval stays within the terms of the European Commission decision and that the Executive can account publicly and to the Commission, as required, for approvals granted and subsequent public funding received by Credit Unions under the scheme. Credit Unions will only be able to apply for approval when they have a realistic prospect of receiving public funding. This will prevent wasted work on applications by Credit Unions and the Scottish Executive.
There will be no upper limit to the amount of public funding that any individual Credit Union can receive for providing one of the four SGEI products although there is a notional upper limit of £5m public funding under the whole approval scheme.The Executive hopes to be able to grant approval within 4-6 weeks of a Credit Union applying. This will depend, however, on the Financial Services Authority (FSA) being able to release information about a Credit Union's compliance with statutory requirements in that time frame. The Executive will set up pages on its website for the purpose of publishing information on Credit Union approvals and details of public funding received, as the European Commission requires.
It should be noted that approval under this scheme, from Communities Scotland, does not guarantee funding - this is a decision for each public funder to make.
The Guidance notes, a checklist for Funders, a checklist for Credit Unions, the application form for Credit Unions, Annex E, Annex F and Annex G are all available online.
http://www.communitiesscotland.gov.uk/stellent/groups/public/documents/webpages/cs_015217.hcsp
Credit unions that have received SGEI approval are listed online.
For further information, please contact Guthrie Handley on 0141 305 4172.